The Next Wave of Manufacturing

2012 has literally been the year of all sorts of New Industrial Revolution prophecies. Jeremy Rifkin has popularized his idea of the Third Industrial Revolution and the shift to lateral power at the ‘Mission Growth’ conference in Brussels. Chris Anderson has written about the maker movement and how this would would be the New Industrial Revolution. Peter Marsh has written about the fifth revolution in The New Industrial Revolution: Consumers, Globalization and the End of Mass Production. Even myself, I have become research professor on the revolution in manufacturing.

MIT’s Technology Review has started a new series on the Next Wave of Manufacturing. I’ll be re-blogging this series here, trying to give it a European perspective.

The first two editions were on the topic of technology (3 Jan) and machines (4 Jan). The technology piece argues, that manufacturing needs to be close to development, because “[w]ithout understanding the details of production, you can’t really design the most competitive products”. Hear hear! one is tempted to say. Integrated product development and concurrent engineering come to mind, principles we’ve been taught as crucial to modern manufacturing back in the 1990s: designing manufacturing and product support processes together with the design of the product. They have been embraced by the space industry, and the automotive industry. The disappearing wage differences between China and Mexico and the risk natural disasters pose to global supply chains (the article cites the Japan earth quake and tsunami in 2011 as an example) only give more weight to this argument. So the question really is ‘[i]f labor is not the differentiating factor, you need to ask, “What can be?”‘. If the answer is manufacturing technology then there are two factors that limit an economy’s ability to actually make use of that technology: one is the cost of capital investment to buy the technology, and the other is the availability of technology-savvy personnel to operate and maintain it.

Consequently, economist Ricardo Hausmann argues, that the US would need to become a big producer of the machinery of the next wave of manufacturing and do something about the knowledge export: ‘the retention of the high-skilled people who come here to study and then don’t stay’. The really interesting information in this interview, however, is the link to the Atlas of Economic Complexity. In a nutshell, this atlas ‘measures’ the variety and interconnection of knowledge available in a country by studying imports and exports of products. Goods like ‘medical imaging devices or jet engines, embed large amounts of knowledge and are the results of very large networks of people and organizations’, they are produced by complex economies. Simpler goods like wood logs, coffee, cheese or tulips ’embed much less knowledge, and the networks required to support these operations do not need to be as large’, the economies producing them are less complex. In the complexity ranking of the atlas, Japan, Germany and Switzerland have been the three most complex economies for decades; the US is currently (2008 data) number 13, the Netherlands number 23, Mexico is number 20, India is 51, Brazil is 52. Last on the list are Papua New Guinea, Congo, Angola, Sudan and Mauritania. I feel I’ll have to spend some time with this atlas…

Further topics of the series on the Next Wave of Manufacturing will cover: